Education Department tweaks proposal on student loan fraud claims

EDUCATION DEPARTMENT TWEAKS PROPOSAL ON STUDENT LOAN FRAUD CLAIMS: The Trump administration has made some changes to its working draft plan to overhaul how the Education Department handles student loan fraud claims. Department officials earlier this year proposed a stricter standard for when federal student loan borrowers defrauded by their colleges can have their debt forgiven. Now, as the department prepares for a final round of negotiations over the “borrower defense to repayment” rule, officials are making some tweaks to the proposal.

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— Still, much of the revised draft plan, circulated to negotiators this week and obtained by POLITICO, remains unchanged from the previous version in January. Borrowers would still have to demonstrate that the college’s misrepresentation to them was intentional – or at least reflected “a reckless disregard for the truth.” And they’d also have to show that the misrepresentation led to monetary damage.

— But the Trump administration is now proposing a new evidentiary standard for the claims. Under the Obama-era rule, the Education Department would have evaluated borrowers’ claims under a “preponderance of the evidence” standard. The Trump administration floated using a higher, “clear and convincing” standard of evidence, earlier this year. The latest proposal calls for requiring borrowers to establish their claim using a “substantial weight of the evidence” standard. In addition, department officials proposed a new requirement that borrowers must submit their applications for loan forgiveness “under penalty of perjury.”

— The revised proposal would also give colleges more certainty about when they’ll be on the hook for the cost of loan forgiveness. Under the plan, when the department approves a borrower’s claim that he or she was defrauded, the department would have a three-year period to have the school reimburse the government for the cost of forgiving the loan. The department’s new plan would also give the school a second chance to show that a fraud claim should not have been approved before the school has to repay the money to the government.

— The Education Department’s rulemaking panel convenes next week for a third and final round of negotiations over the “borrower defense to repayment” rule. If the committee fails to reach unanimous consensus on a plan, which seems likely, the Education Department will be free to formally propose its own version of the regulation.

KEY TAKEAWAYS FROM THE CBO SCORE OF HOUSE GOP HIGHER ED BILL: The House GOP bill to overhaul the main law governing higher education would reduce mandatory federal spending on student aid by $14.6 billion over the next decade, according to an estimate released Tuesday by the Congressional Budget Office. CBO also estimated that the legislation, H.R. 4508 (115), would lead Congress to appropriate an additional $210.1 billion in funding over the next decade. That estimated increase in discretionary spending is fueled largely by the bill’s reauthorization of the Pell Grant program, the CBO said. Read more.

— What accounts for the reductions in mandatory spending: Eliminating loan forgiveness for borrowers who work in public service would reduce mandatory spending on the student loan program by roughly $25 billion over the next decade, the CBO said. Scaling back the benefits of income-based repayment plans would save roughly $15 billion over 10 years. And eliminating subsidized student loans, along with increasing undergraduate loan limits, would reduce federal spending by $18.5 billion over the next decade.

— The biggest ticket items: The bill proposes a new Pell Grant bonus program that would award an additional $300 to students who take at least 15 academic credits each semester. The initiative would boost spending by $7.3 billion over the next decade. And the elimination of origination fees paid by federal student loan borrowers would increase spending on the student loan program by $14.5 billion over the next 10 years. The bill’s “borrower defense to repayment” provisions governing how the Education Department must handle student loan fraud claims would increase spending on the student loan program by $3.2 billion over the next decade.

— Deregulating comes with a price tag: The legislation would scale back a range of requirements and regulations that Republicans have argued are too burdensome or unfairly targeted for-profit colleges. The CBO said that those provisions in the bill would lead to greater federal spending on student aid. Getting rid of the 90/10 rule — which caps for-profit schools' receipt of federal student aid at 90 percent of their revenue — would "allow those schools to expand enrollment," the CBO said, increasing mandatory spending on Pell Grants and student loans by $2 billion over the next decade.

— Easing the requirement that distance education providers have “regular” and “substantive” interaction with faculty would also send more federal funding to those types of programs, costing $1.9 billion. And the bill’s proposal to eliminate the Obama-era “gainful employment” rule — and prohibit any future regulations on that issue — would cost taxpayers $485 million over the next decade.

— New accountability metrics would have some bite: Under the bill, the Education Department would no longer judge colleges based on the rate at which former students default on their federal loans. Instead, colleges would be held accountable for how well a program’s graduates are repaying their federal loans. CBO estimated that the switch from loan default rates to loan repayment rates “would cause some additional programs to lose eligibility” for federal student aid, saving taxpayers $267 million over the next decade.

— Another accountability measure in the bill — dubbed a “risk-sharing” plan — would require colleges to return a greater share of federal student aid back to the government when a student withdraws. That would save taxpayers $522 million over the next 10 years, the CBO said.

— Democrats seized on the CBO score, arguing that the GOP bill would amount to a “raid” on student aid. “The CBO’s score of H.R. 4508 confirms what we already knew to be true — this bill makes college more expensive for America’s students and working families,” said Rep. Bobby Scott (D-Va.), the top Democrat on the House Education and the Workforce Committee, in a statement.

— A spokesman for Republicans on the committee, led by Rep. Virginia Foxx (R-N.C.), responded by saying that the “reforms are necessary to provide students with a high-quality education, and fix a system that has not been serving their needs. Not only have we been able to put forward major reforms that improve the postsecondary education system for students like the expansion of Pell grants, innovation for apprenticeships and earn and learn opportunities, and simplification of student financial aid, but we have shown that those major reforms can be done while still being fiscally responsible,” the spokesman said.

TRUMP BUDGET LOOMS FOR EDUCATION GROUPS: The Trump administration in the coming weeks is expected to ask Congress for steeper cuts to federal education funding than what was proposed last year. That’s according to multiple people familiar with the cuts, but who requested anonymity because the Trump administration is keeping the figures tightly under wraps.

— The proposed overall cut is unclear, but those familiar with the budget request expect it will exceed the $9.2 billion reduction proposed by the Trump administration last year. That amounted to a 13 percent reduction in the Education Department’s $68 billion discretionary budget.

— The largest formula grant funds, like Title I funding for poor students and special education funding, are expected to remain about the same or not take a major hit. But the vast majority of discretionary grant programs could be on the chopping block as the Trump administration tries to identify where deeper cuts are possible, according to those familiar with the budget.

— Flashback: Last year, the Trump administration proposed about $12.7 billion for special education funding and $14.9 billion in Title I funding. States would have lost about $112 million and $550 million, respectively. Trump also proposed an additional $1 billion in Title I funding to encourage public school choice.

— Congress didn’t bite. And cuts to other programs, like more than $2 billion for teacher training and more than $1 billion in federal funding for after-school programs, proved unpopular among lawmakers.

HOME VISITING LEFT OUT OF SPENDING BILL: Backers of the Maternal, Infant and Early Childhood Home Visiting Program are expressing frustration that the stopgap spending bill, HR 1892 (115), that the House passed Tuesday night to keep the government afloat after Thursday does not include a provision that would reauthorize the program, which expired Sept. 30. Backers are calling on senators to include it in their version of the government funding bill. The program, which is funded at $400 million annually, targets disadvantaged families by providing support to states for educational and other in-home services to pregnant mothers and families with young children.

— If the Senate doesn’t act, “babies and their families will be denied access to the quality home visiting experiences that are proven to help them lift themselves out of poverty,” said Sarah Rittling, the interim executive director of the First Five Years Fund, which advocates on early childhood issues. “Congress cannot and should not continue to kick the can down the road and sidestep this vital program that shares widespread support and has been elevated as a priority up to this point.”

PARENTS OF TRANSGENDER STUDENTS PEN LETTER TO DEVOS: More than 700 parents of transgender children have written a letter to Education Secretary Betsy DeVos, urging her “to recognize the basic human and civil rights of transgender students.” The letter comes as DeVos has been on the job for about a year. It was organized by the Human Rights Campaign. The parents condemn the Trump administration’s rescission of an Obama-era directive last year aimed at protecting the rights of transgender students.

— Since that directive has been rescinded, the parents say the Education Department’s civil rights office isn’t taking the complaints of transgender students seriously. “However, years of legal decision-making prior to this guidance has established a strong precedent of taking transgender students’ complaints of discrimination seriously,” the parents write. “Failing to act is not simply the undoing of one leader’s guidance, but the intentional refusal to recognize years of precedent on the federal level.” More.

NEW JERSEY GOVERNOR MAKES PITCH FOR FREE COMMUNITY COLLEGE: Gov. Phil Murphy, the new Democratic governor of New Jersey, is renewing his pitch for tuition-free community college, returning to an issue he campaigned on last fall. But Murphy tried to tamp down expectations when asked if he would start to put money toward a free tuition program in his fiscal 2019 budget proposal. Read more from POLITICO New Jersey’s Linh Tat.

REPORT ROLL CALL

— The Dignity in Schools Campaign, Partners for Each and Every Child, and the NAACP Legal Defense and Educational Fund are out with a “toolkit” of resources for communities on the Every Student Succeeds Act.

MOVERS AND SHAKERS

— Dan Greenstein is stepping down as director of postsecondary success at the Bill and Melinda Gates Foundation.

CORRECTION: An earlier version of Morning Education incorrectly described how the 90/10 rule works. It caps for-profit colleges’ receipt of federal student aid at 90 percent of their revenue.

About The Author : Michael Stratford

Michael Stratford is an education reporter for POLITICO Pro. He most recently covered federal higher education policy and student loans at Inside Higher Ed, with previous bylines at The Associated Press, The Chronicle of Higher Education, and Kiplinger’s Personal Finance magazine. Stratford grew up in Belmont, Mass. and graduated from Cornell University, where he was managing editor of The Cornell Daily Sun.